Obama Loses Another Tax Battle to Big Oil, but the War Isn't Over

NEW YORK (TheStreet) -- President Obama has been on a mission to take back billions in tax breaks from the biggest five oil companies for the past two years, and this week's attempt went the way of the previous efforts: Nowhere fast.

This may be a scenario, though, of losing the battle and winning the war. In the broader campaign for corporate tax reform, Big Oil tax breaks may yet become a major casualty.

The Senate once again voted down legislation that would have taken away tax breaks from the five biggest oil companies, a vote along party lines at 51-47, and one that fell short of the 60 votes required. Last year, the Senate fell eight votes short of the 60-vote threshold.

President Obama's campaign to tax Big Oil companies has two goals. The senatorial "do the math" missive made clear that seeing the latest Big Oil tax break bill pass wasn't among those goals.

The opportunity for the president to speak out about the gargantuan profits of the oil companies at a time when gas is $4 a gallon isn't without its sound-bite merits. It plays well in Peoria even if it falls on deaf ears with Republicans in Congress. That's the November 2012 election-season goal.

Yet there's a longer-term game plan, in which an emboldened president could seek to capitalize on his victory to make corporate tax reform a hallmark of a second term.

"For the foreseeable future, there is no legislative hope. In the medium-term though, the president is looking to plant the seeds of something else," said Benjamin Salisbury, energy policy analyst at FBR Capital Markets, like if the Big Oil tax break rhetoric of today can set the tone for a larger narrative about corporate tax reform in 2013 and how society thinks about these issues after election.

"That matters more than how many votes the measure received on Thursday," Salisbury said.

The two parties are closer together on corporate tax reform than the typical D.C gridlock would suggest: Both congressional aisles want to lower the broad corporate tax rate while taking away individual tax expenditures - e.g. the Big Oil tax breaks.

President Obama recently proposed lowering the corporate tax rate to 28%. Congressman Dave Camp (R-MI), the chairman of the House Ways and Means Committee, has proposed a 25% corporate tax rate.

"That's not a very wide bid/ask spread," noted Edward Kleinbard, University of Southern California law professor and former chief of staff of the U.S. Congress's Joint Committee on Taxation.